The movie theater industry pulled in over $69.78 billion in 2022, proving that the magic of the movies remains strong despite the popularity of at-home streaming services. With an estimated compound annual growth rate (CAGR) of 5.24% from 2021 to 2028, now is a great time to get started with your own movie theater.
Have you ever dreamed of opening your own cozy, community-centric theater? Or perhaps a state-of-the-art multiplex equipped with luxury recliners and immersive cinematic technology appeals more. Either way, launching a profitable movie theater in today’s entertainment landscape is achievable if you lay the proper groundwork.
This guide will walk you through how to open a movie theater. Topics include market research to build your movie theater business plan, registering an EIN, forming an LLC, obtaining business insurance, opening a business bank account, and more.
1. Conduct Movie Theater Market Research
Market research is an integral part of starting a successful movie theater business. It offers insight into a variety of important details including trends in independent films, price models, market saturation, and your target audience.
Some details you’ll learn through market research include:
- While streaming boomed during lockdowns, viewers showed pent-up demand to return to cinemas as restrictions eased.
- The appetite to revisit the cinema is especially prevalent among Gen Z and millennials following the pandemic.
- Catering to these demographics via enhanced amenities like luxury seating, expanded concessions, and alcohol service can further drive sales.
- While the nationwide outlook is encouraging, location remains paramount.
- Real estate intelligence platform Loopnet advises focusing on mid-sized metro areas with populations between 150,000-350,000.
- Building near retail shops and restaurants also boosts visibility and makes attending a social experience.
- Offering more choice through mix-and-match ticketing, customizable concessions combos, local beer/wine options, and affordable prix fixe bundles can unlock new revenue streams.
- Enhancing lobby retail with better merchandise and collectible displays also produces returns.
The customer appetite for in-theater moviegoing keeps growing. For entrepreneurs able to pinpoint the right location, understand emerging viewing preferences, and provide the complete night-out package, launching a successful new theater in this climate is achievable.
2. Analyze the Competition
Understanding the competitive landscape is crucial when assessing a new theater’s prospects. Begin by identifying cinemas already operating in your targeted metro area and geography using resources like Google Maps, Yelp, and Fandango’s theater directory.
Some ways to learn more about competitor movie distributors and movie theaters include:
- Note their specific locations, number of screens, seating capacities, parking availability, and type of experiences offered through online listings and social media pages.
- Drive-by visits can further reveal pricing, concessions menus, lobby retail selection, and the overall theater condition.
- Look beyond the big chains too. Non-profit community theaters like Laemmle in Los Angeles and studio-backed arthouses like Landmark often thrive in underserved urban neighborhoods the mega players overlook.
- Research these competitors’ online reputations via review aggregators like niche cinema sites like FlickChart to uncover potential service gaps.
- Common top complaints for major chains include ticket costs, concession prices, cleanliness issues, and declining presentation quality.
- A tool like SEM Rush further analyzes the search visibility, web traffic patterns, and online engagement shaping regional consumer choices.
- Assessing competitors’ digital savvy exposes where your site or app may better inform film fans on showtimes, pricing deals, and loyalty programs to win their business.
While daunting, this comprehensive competitive analysis arms aspiring owners with the intelligence to carve a niche.
3. Costs to Start a Movie Theater Business
Embarking on opening a movie theater requires a significant upfront investment. From securing real estate to installing projection and sound technology to concessions equipment, owners must be prepared to spend several hundred thousand dollars or more getting their business off the ground.
Start-up Costs
- Location scouting starts the process. Leasing an existing property with an intact auditorium like an old church or community center potentially saves over $1 million in build-out costs.
- Expect to budget around $20 per square foot monthly regardless of rent.
- Buildings must also allow for stadium seating installation, sizable screening rooms, ample parking, and easy retail/restaurant access to attract customers.
- For new construction, land acquisition and permitting add more expense before factoring in $150-$200 per square foot for a basic build incorporating digital projection, sound systems, screens, and seats.
- Owners may secure SBA-backed loans covering up to $5 million for qualifying projects.
Specialty cinemas like IMAX or luxury formats boost budgets further through additional tech and seating requirements. Used equipment from theater auctions provides potential savings.
Ongoing Costs
- On the operations side, digital projectors run from $70,000, and processors $30,000 each. Top-quality surround sound systems add $15,000 per auditorium.
- Stadium seating ranges from $100-500 per leather recliner. High-end concessions equipment including popcorn makers, fountain drink stations, and nacho warmers tally $30,000.
- First-run film licensing also claims significant sums, with yearly Virtual Print Fees of $500+ per title. Art house cinemas utilizing e-projection potentially save here.
- Staffing requires reliable management to oversee daily functions, projectionists to program content and systems, box office personnel, ushers, janitorial crews, and concession workers.
- Industry average wages range from $10-$15 hourly for frontline roles and $45,000-$60,000 for GM salaries. Year one labor for a four-screen theater staffed during peak periods may reach $350,000.
- Strong security systems are equally vital, costing approximately $3,500 for high-grade cameras and monitoring. Business insurance averages $3000 annually.
- Other necessities like cash registers, ticketing kiosks, cleaning machinery, office equipment, and supplies add further overhead. Unexpected repairs must be budgeted for too.
All said, launching a basic four-auditorium, 800-seat theater requires a minimum of $1.5 million. Larger venues seating 2000 may demand double. Smaller, simpler venues such as drive-in theaters cost less but still require ample space. Committing ample capital for quality construction, equipment, and staff prevents avoidable issues threatening profitability.
Alternatively, you can also offer movie theater services to campgrounds and summer camps where you can set up professional equipment and play the movie through a projector and onto a movie screen.
4. Form a Legal Business Entity
When launching a cinema, the legal framework profoundly impacts financing options, tax burdens, and personal liability. Weighing each structure’s pros and cons ensures the best choice for your goals and risk tolerance.
Sole Proprietorship
Sole proprietorships offer the easiest route with no formal registration needed outside routine permits and licenses. Owners declare theater profits or losses on personal returns. However, retaining full unlimited liability can prove catastrophic if sued. Even minor things like slips and falls could threaten personal assets without sufficient insurance.
Partnership
Partnerships allow the pooling of resources and talent, ideal for operators handling distinct tasks like programming and hospitality. General partnerships still expose personal assets to debts and legal claims, while limited partnerships protect silent investors. Logistics in sharing profits and decision-making authority prove challenging, however, especially when disagreements arise or partner exits.
Limited Liability Company (LLC)
That brings us to limited liability companies (LLCs), the most advantageous structure for theater venturers. As the name implies, LLC status shields owners’ assets like houses should the business face lawsuits or bankruptcy. An LLC limits legal and financial liabilities only to the company itself.
Corporation
Establishing the business as a formal corporation does facilitate raising funds through stock shares. Yet doubled taxation of company earnings and shareholder dividends deter private investment. Rigid corporate requirements around record keeping, directors’ meetings, and annual filings also burden small enterprises.
5. Register Your Business For Taxes
With any commercial enterprise, formally registering for state and federal tax purposes is essential once up and running. Movie theaters specifically must obtain an Employer Identification Number (EIN) from the Internal Revenue Service and arrange for sales tax collection.
An EIN serves as a business’s tax ID number used on all official documents and returns. Applying online takes just minutes after completing steps like choosing the LLC business structure and specifying Movie Theater under “Principal Business Activity” when prompted.
The EIN application requires the owner’s Social Security Number, business address, and contact details. After submitting, an EIN is typically assigned immediately. This unique identifier then opens doors to establishing payroll processing, business banking, and licensing accounts essential for operations.
With an EIN in hand, registering with your state tax authority comes next to collect the required sales tax on ticket and concessions transactions. Nearly all states levy amusement taxes on theatergoers.
Online registration portals like MyTax Illinois for example allow inputting the EIN, business category code 713120 under NAICS for Movie Theaters, and county/municipality. This activates a sales tax account for filing monthly or quarterly returns reporting admission fee collections. Some cities like Chicago also impose their entertainment taxes reported separately.
Minimal one-time enrollment costs apply based on state. However, properly registering for taxes before opening doors avoids headaches in verifying tax compliance status with film studios. More importantly, meticulous tax record keeping and payments steer clear of penalties or lawsuits as operations grow.
Managing sales tax collection across multiple state/local jurisdictions introduces added complexity for chains with sites nationwide. But taken step-by-step, sole proprietors achieve full legal and tax standing quickly through a few straightforward digital applications.
6. Setup Your Accounting
With countless daily transactions from ticket sales to concessions to film licensing fees, a theater generates mountains of financial data. Meticulous accounting is essential right from launch to maintain profitability and avoid IRS headaches.
Getting an organized system in place upfront prevents having to unravel chaotic books later. User-friendly small business software like QuickBooks now makes the accounting process much more manageable through handy tools integrating directly with business bank accounts and credit cards.
QuickBooks enables creating separate Accounts Receivable, Accounts Payable, and Tax lines preset for your theater’s needs. Automatic categorization of daily income and expenses saves hours of manual entry time. Come tax season, QuickBooks generates customized reports meeting IRS requirements.
Supplementing with an expert accountant provides experienced guidance in applying complex amusement tax codes or maximizing write-off opportunities an owner may overlook. Most charge $150-200 per month for basic bookkeeping assistance including payroll, monthly reconciliations, and income statements. Expect closer to $2000 to have an accountant compile full annual tax filings.
During audits, however, having those detailed records readily accessible proves invaluable. Documenting every business expenditure also helps verify legitimate tax deductions later questioned by IRS agents.
Just as critical as managing the books themselves, theater entrepreneurs must keep personal and company finances wholly separate. Commingling funds risks personal liability for company debts or lawsuits. Opening dedicated checking/savings accounts and securing a unique Employer ID Number (EIN) for your LLC establishes distinct legal/tax identities right off the bat.
Likewise, a small business credit card in your theater name builds an independent credit profile helpful in securing financing as operations grow. Providers like Capital One Spark Cash offer 2% unlimited rewards on every purchase along with $500 – $5000 sign-up bonuses you can redeem toward equipment purchases or renovations.
With the proper accounting foundations built early, entrepreneurs can focus on providing amazing cinema experiences rather than number crunching. Let the qualified professionals handle that side of operations while you manage the glitz and glamour.
7. Obtain Licenses and Permits
Once your theater buildout finishes, obtaining proper credentials from local and state agencies is the next crucial step before welcoming your very first audience. Licensing requirements vary between municipalities, but several standard permits apply across most jurisdictions.
For example, all venues allowing food service need health department inspection and approval first. Movie concession stands must comply with commercial kitchen codes regarding equipment, cleaning procedures, employee training, and more. Annual renewal with potential random inspections ensures continued compliance with safety standards.
Connecticut outlines these protocols through a Regulation of Food Establishment license. Its $100 first-year cost and $50 subsequent renewals mirror other states. Philadelphia eateries pay $275 yearly after initial permitting.
With beer and wine sales, alcohol licenses also enter the mix with added proof of staff training in responsible serving. A Theater Alcohol Permit in Texas runs $500-$875 depending on auditorium capacity.
While not directly food-related, proper fire prevention and containment protocols must meet codes as well. Fire department inspections focus on emergency lighting systems, extinguisher placement, exit signage, and storage procedures for flammables like cleaning chemicals. Advanced fire suppression equipment like commercial sprinklers likely requires specific installer certifications.
Meeting ADA accessibility standards represents another civil duty through wheelchair spaces, closed captioning systems, and assistive listening devices for hearing-impaired patrons. DOJ certification protects against discrimination lawsuits and ensures facilities can accommodate all movie lovers.
While daunting, methodically addressing each license well before opening night reduces stress. Consider an entertainment business attorney to ensure full regulatory compliance unique to theaters in your area. Protect the dreams of silver screen success by first conquering the boring fine print.
8. Get Business Insurance
With hundreds of patrons visiting daily, unexpected disasters pose substantial risks for new theater ventures. Properly insuring the business helps hedge against scenarios threatening financial ruin.
For example, a small electrical fire damaging key projection equipment could destroy your grand opening without insurance coverage. A visitor injury from loose carpeting creates a lawsuit loss exceeding the LLC’s assets. Having policies covering property damage, liability claims, and lost income proves essential.
Another “doomsday” scenario involves a bad faith accusation of copyright violation from screening the latest Marvel blockbuster without proper licensing. The legal fees alone might tank nascent operations without protection.
Rather than roll the dice, securing business insurance delivers peace of mind. Experts consider proper coverage one of the most important steps when starting any company today.
Beginning your search, platforms like CoverWallet allow instantly compare plans and costs from top providers like Travelers, The Hartford, and Progressive. Input your location, theater type, seating capacity, and other details to receive quotes for bundled policies.
Common coverages include:
- General liability starts at around $49 monthly
- Professional liability protecting against copyright cases
- Equipment insurance covering projection systems
- Full building/property protection
Work with an agent to customize coverage meeting local codes and your budget. Investing in protection now prevents catastrophic loss later.
9. Create an Office Space
Although daily functions center around the theater itself, securing office space proves essential for administrative tasks from payroll to film booking and vendor calls. Depending on your budget, several options exist to support all the behind-the-scenes work outside of screening blockbusters.
Coworking Office
Coworking spaces like WeWork offer unlimited 24/7 access with business mail service and front desk staff greeting guests. Pricing starts at around $300 monthly for a shared space. With conference rooms, coffee lounges, and networking events also available, the creative energy and amenities cater well to small entertainment ventures. Larger dedicated offices rent for $600 plus.
On-Site Office
For theaters located in strip malls, an on-site office allows managers direct access to box offices and facilities. If suites connect directly to auditoriums, security risks require consideration, however. Monthly rents average $2 per square foot, so a 200 sq ft shop adds a few hundred dollars to operational costs.
Commercial Office
Traditional commercial spaces nearby deliver professional meeting spaces apart from patron traffic, albeit with higher rents. Expect starting rates of around $15 monthly per square foot plus lease terms of 2-5 years in major metros. With careful planning, however, the continuity and corporate identity often prove worth the added expense.
10. Source Your Equipment
Bringing the big screen experience to life requires significant upfront investment in high-quality projection and sound systems, seating, and concessions equipment. Carefully sourcing these essentials through new purchases, used deals and rental partnerships helps maximize startup budgets.
Buy New
Buying brand new through authorized resellers ensures acquiring modern systems with full warranties. Digital projection leader Christie, used in over 95% of US cinema screens, offers packages from $70,000 delivering up to 14,000 lumens brightness and high contrast. Their Solaria projectors also enable securing first-run studio content.
Buy Used
Seeking used gear through auction sites and resellers provides major cost savings. Resources like eBay, Craigslist, and Facebook Marketplace offer older model projectors and audio components in working order at 40-60% discounts. Test thoroughly before purchasing to confirm functionality. Replace bulbs and filters to optimize image quality.
Rent
For startup owners on ultra-tight budgets, equipment rentals enable opening doors without huge capital outlay. Sites like ShareGrid facilitate renting pro cinema cameras and lenses for indie productions. Establish relationships with local production houses and projection integrators to arrange affordable month-to-month rentals on essential gear as needed.
11. Establish Your Brand Assets
Crafting a distinctive brand identity helps new movie theaters stand apart on busy commercial strips already potentially hosting competing chains. Investing in quality logo design, websites, signage, and marketing materials makes memorable first impressions while conveying your unique value.
Get a Business Phone Number
Securing a dedicated business phone line also boosts legitimacy for initial calls with studios, vendors, and partners. Top providers like RingCentral offer toll-free numbers, call routing technology, and voicemail transcriptions for as little as $30 monthly.
Design a Logo
An iconic, memorable logo sets the visual tone for all branding efforts. Modern minimalist icons using symbolic shapes, vintage lettering, and clever name integration all work for arthouse vibes. Sites like Looka offer quick DIY logo makers or custom designer services.
Print Business Cards
Integrating the logo across business cards, posters, concessions menus/cups/napkins, theater entrance signage, and pre-show slides cements instant recognition. Services like Vistaprint facilitate affordable ordering of all collateral from posters and table tents to staff t-shirts.
Buy a Domain Name
Staking your claim online requires securing ideal domain names reflecting the brand too. Venues like Cinespia and Nitehawk Cinema fuse location and activity effectively. Sites including Namecheap make registering .com or .tv domains simple for under $15 yearly.
Design a Website
Building a sleek website introduces web visitors to your vision, programming, amenities, and more. User-friendly builders like Wix facilitate DIY site creation with handy templates. Those preferring custom coding can hire skilled freelancers on Fiverr starting around $500. Optimized sites drive online ticket sales while conveying your differences.
12. Join Associations and Groups
While competitive, the cinema industry also fosters a tight-knit community amongst fellow theater operators. Tapping into local groups, trade associations and industry peers provides invaluable mentorship opportunities to navigate the complex world of film licensing, marketing, and concessions.
Local Associations
For starters, area Chambers of Commerce like the Austin Independent Business Alliance connect with other small entertainment venues shaking up their cities. These communities facilitate marketing collaboration, local vendor referrals, and unified policy advocacy benefiting indie players.
Local Meetups
For connecting with peers, sites like Meetup host regular mixers allowing candid idea exchange. The NYC Independent Filmmakers group for example unites directors, producers, and cinema owners collaborating on film events or co-promotions.
Facebook Groups
Digital networking expands through regional social channels like L.A. THEATER NETWORK, a Facebook group with 6.4K site users sharing successes, challenges, and collective support. Discussions cover practical insights from concession supplier referrals to marketing campaign inspiration worth tapping into.
13. How to Market a Movie Theater Business
Effective marketing transforms newly launched theaters into cherished community mainstays. Strategically promoting your cinematic vision introduces audiences to the magical worlds inside while building enduring local connections. For theater owners, there are several marketing methods to try.
Referral Marketing
Satisfied viewers become loyal brand advocates organically spreading word-of-mouth excitement, still the best referral source. Special sneak previews, star-studded opening nights, and giveaways incentivize that enthusiastic endorsement. Capture those post-movie smiles for social media story highlights and user-generated content.
Digital Marketing
Digital channels offer targeted, cost-efficient customer acquisition harnessing data-driven insights into local entertainment preferences.
Google Ads geo-fencing spots your theater website and showtimes to movie fans within a customizable radius. Facebook/Instagram ads display trailers and concessions deals to tailored age groups and interest categories using smart audience selection tools.
Email collection via in-person sign-up sheets or online ticketing profiles facilitates sending customized showtime calendars, new arrival alerts, and exclusive promo codes driving repeat visits.
Maintaining an engaging social media presence also fosters connections with fans and drives impulse ticket purchases.
Post-insider first looks at lobby renovations, trivia contests, and Hollywood star appearances happening on-site. Seek out early reactions to Oscar contenders or the newest blockbuster franchise installment screening exclusively at your location.
Solicit reviews across Facebook, Instagram, Twitter, and TikTok while actively responding to feedback.
Traditional Marketing
Simple low-cost tactics like sidewalk A-frame chalkboard signs displaying current/coming attractions help draw neighborhood foot traffic. Loyalty programs with freebie incentives encourage sign-ups for email/text alerts on new releases and events.
Traditional outlets still hold relevance when budgets allow. Running 30-second pre-roll ads before Hulu or YouTube videos in a regional market reinforces brand familiarity. Creative billboard concepts along busy commuting routes make lingering impressions.
Mix and match digital and real-world strategies maximizing exposure channels where people seek local happenings. Consistently engage, inform, and reward your audience for choosing your screens over the living room couch.
14. Focus on the Customer
In an age of rising ticket prices and home entertainment competition, delivering exceptional hospitality represents theaters’ greatest asset for earning loyal fans. Customer experience drives word-of-mouth enthusiasm enticing new visitors better than any advertisement.
The moments that spark someone’s lifelong theater devotion are often traced to a single personal touch. Maybe it’s the manager who apologizes for technical difficulties with free passes. Or the concessions crew remembers a regular patron’s favorite candy and surprises them with it unsought.
Even small gestures like greeters opening doors for parents pushing strollers for hands-free entry set your venue apart. Others in the area likely skimp on service quality to maximize profits. This spotty attention frustrates patrons and limits repeat business even if new releases keep attracting initial attendance.
Show moviegoers your theater offers something beyond screens by making every staff interaction welcoming. When disappointed visitors give second chances because “the staff is so friendly,” you earn enduring advocates. With countless entertainment options today, reliable hospitality and loyalty incentives will keep fans choosing your box office first.